It was an enacted in response to a preexisting problem. The crash created a panic, and the government reacted with a protectionist measure. The same thing happened after the 2008 crash with some similar protectionist measures, though so far the damaging effects haven't been fully felt. You can't take protectionist measures like this unless you overwhelm the world with an excess supply of money. This is why we haven't yet seen a depression. However, we may very well have simply kicked the can a little further.
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Xmas Rally Has Finished.
- Thread starter GrandSupercycle
- Start date
It was an enacted in response to a preexisting problem. The crash created a panic, and the government reacted with a protectionist measure. The same thing happened after the 2008 crash with some similar protectionist measures, though so far the damaging effects haven't been fully felt. You can't take protectionist measures like this unless you overwhelm the world with an excess supply of money. This is why we haven't yet seen a depression. However, we may very well have simply kicked the can a little further.
Quote from bhardy307:
Ok, I'll watch it, but I have to ask you something:
Given the nature of floating currencies, where does the money go when it rushes out of the Euro? Is this good for USA to suddenly have much more expensive products making it much more challenging to export. A significant rush back to the US dollar increases the likelyhood of a new recession in the USA. As the credibility of the US economy deteriorates and the stock markets fall, where does the money go?
No major economy wants a currency that is overvalued. They will do everything they can to insure their currency isn't overvalued. They have no choice but to prop up the euro in order to protect their own currency. Otherwise, their own goods become too expensive, and they risk falling into a recession.
Most likely to gold or silver in dollars, rather than gold in euros in dollars.
My long term indicators have continued to warn of US Dollar strength and EURO weakness and these signals have increased since 2009. The overdue dollar rally should be substantial.
http://stockmarket618.wordpress.com
http://stockmarket618.wordpress.com
Quote from bhardy307:
It was an enacted in response to a preexisting problem. The crash created a panic, and the government reacted with a protectionist measure. The same thing happened after the 2008 crash with some similar protectionist measures, though so far the damaging effects haven't been fully felt. You can't take protectionist measures like this unless you overwhelm the world with an excess supply of money. This is why we haven't yet seen a depression. However, we may very well have simply kicked the can a little further.
Bhardy, the cause of the reduction in money supplies <b>was the Crash of 1929.</b> We didn't have financial regulations wrt leverage, and even if you want to say a protectionist measure was their response it was my understanding that Smoot Hawley may have been known to the market prior to this (I think it came 2 weeks after so it was already almost through both houses and about to pass the Senate 2 weeks to a month before it was enacted), and, as far as I'm concerned, you're probably never going to hear about the true causes of the Depression because you've never heard any lectures by History Professors who actually know something about economics.
We haven't seen a depression because every other country is printing money even faster than we are, and they all of the same problems, but we don't have anyone that could bail us out, and inevitable currency collapse is just the start. May 6th was probably due to a Nuclear Bomb scare and the machines were busy selling to each other.
I'll put it to you this way, we are talking about a crash happening within 1 day and this would be like Dow 12,000 going to Dow 5,000 in a single day, so you're going to sit here and tell me that we started restricting money supplies? No, sir, that was the reduction, and even the rate hikes were necessary according to the Fed papers when I think they raised from 3% to 4% and this would have had negligible effects even today.
Quote from bwolinsky:
Most likely to gold or silver in dollars, rather than gold in euros in dollars.
Ahhhhhh, we got ourselves a goldbug.
Nope, sorry, if we are headed back into what will be a deflationary environment, given your arguments, we will go back to a money in the mattress environment. This, by the way, was a big contributing factor to the money supply issue in the depression. There was lots and lots of cash, but it was all stashed away in the mattresses of a few. Why were they saving it in their mattress? Collapsing banks, and because deflation increases the purchasing power of their money. There was therefore a reduced insentive to spend their money, reducing money velocity, and further increasing deflation.
Quote from bhardy307:
Ahhhhhh, we got ourselves a goldbug.
Nope, sorry, if we are headed back into what will be a deflationary environment, given your arguments, we will go back to a money in the mattress environment. This, by the way, was a big contributing factor to the money supply issue in the depression. There was lots and lots of cash, but it was all stashed away in the mattresses of a few. Why were they saving it in their mattress? Collapsing banks, and because deflation increases the purchasing power of their money. There was therefore a reduced insentive to spend their money, reducing money velocity, and further increasing deflation.
It's funny you mention that, because my family had mountains of 1929, 1932, and 1932 crazy 8's as well as gold certificates in $10, $20, and $100 denominations.
I don't think the individual could do this, but it's not that I'm a gold bug but that if you really knew economics you would know it is not an illogical argument when there's no safe money to earn interest on, that's literally the only thing next to dollars that are worth holding.
Bhardy I'm not one to try to stick gold down someone's throat, but you're just going to have to eat it, because I've had OTM gold calls since before I was a CTA as a recommendation, but that bubble is coming to an end if you ask me, and it's not that I think that they'd be great investments but that that's the only other play people'd have in their repetoire.
I hope you learned something, but I'm tired and if you write any other questions I'll get to these tomorrow.
Good night.--
Beau
I hope you learned something, but I'm tired and if you write any other questions I'll get to these tomorrow.
Good night.--
Beau
Quote from bwolinsky:
It's funny you mention that, because my family had mountains of 1929, 1932, and 1932 crazy 8's as well as gold certificates in $10, $20, and $100 denominations.
I don't think the individual could do this, but it's not that I'm a gold bug but that if you really knew economics you would know it is not an illogical argument when there's no safe money to earn interest on, that's literally the only thing next to dollars that are worth holding.
Are you sure? If the Euro is going down and USD is consequently going up, anything priced in USD fall. There would have to be a complete collapse in confidence of all major currencies to ensure a real rush into gold and silver. In the meantime, stock markets all over the world are collapsing. Gold tends to fall as a result of this since traders are desperately looking for cash to cover their losses.
Quote from bwolinsky:
Bhardy I'm not one to try to stick gold down someone's throat, but you're just going to have to eat it, because I've had OTM gold calls since before I was a CTA as a recommendation, but that bubble is coming to an end if you ask me, and it's not that I think that they'd be great investments but that that's the only other play people'd have in their repetoire.
I hope you learned something, but I'm tired and if you write any other questions I'll get to these tomorrow.
Good night.--
Beau
Yes, sleep is a good idea. Thanks for the great discussion. Have a good night.
Quote from bhardy307:
Are you sure? If the Euro is going down and USD is consequently going up, anything priced in USD fall. There would have to be a complete collapse in confidence of all major currencies to ensure a real rush into gold and silver. In the meantime, stock markets all over the world are collapsing. Gold tends to fall as a result of this since traders are desperately looking for cash to cover their losses.
Law of One Price and Arbitrage Pricing Theory say that whether it's Euro or Dollar Denominated Gold and precious medals that they must be worth the same or else there is an arbitrage opportunity.
This is the hyperinflationary scenario envisioned by the NIA, and I think the Euro's collapse will confirm for us the failure of sovereigns is all but assured.
It's a nightmare I woke up from to beg my dad to sell because these problems aren't just much worse than our credit crisis, again, they are 156 times worse because of the scope and lack of economies of scale in dealing with financial problems as big as those of entire nations.
However the ECB decides to handle it it's nice that we're watching them go through it before us because we'll see a Semi-Sovereign like California declrare bankruptcy and that could be the signal that could be the trigger when it comes time to re-up once again and default yet again on our Treasury obligations as the Federal government orchestrates a bailout of State governments likely to include California, New York, and a few other states under major financial distress.
So, yes, I'm sure. It will be interesting following a chart of this occuring, especially the first time interest rates globally spike, gold and precious medals sky rocket because of interest rate carry and arbitrage opportunities as the Euro crashes and struggles for prices denominated globally to reach equilibrium which I estimate in order for the Euro to fall as much as it needs to would mean Euro is worth much less than parity with the US Dollar, around 0.8-0.9 as I have said.
Trade accordingly, but I really don't advise anybody to hold stocks if they're merely expecting inflation to carry their investments because just as Bill Gross is finding his decision to exit longer term bonds may have been his worst decision ever as PIMCO's portfolio manager. The "cry in your beer" comment means he's aware that he made a mistake in his timing, but I'm sure he'll be proven right because it is absolutely impossible for our Fed to maintain rates at their current levels without another round of quantitative easing and more hyperinflation that is understated by our government through the use of hedonics and geometric weighting. I don't really know how fast inflation is rising, or the real interest rates, but if you're not an economist and have no data then this is impossible to say because truly their dependence on government collected statistics, especially ones recorded by the BLS and Federal Reserve, are seriously suspicious as to have been manipulated out of necessity where than veracity.
I'm more concerned that we will try get involved beyond our limited currency swap agreements, and though I'm sure they're priced consistently, those swaps are so the ECB has leverage to intervene using currencies other than Euros, but if they tap their lines and are unable to pay, it is very likely that those swaps will lead to more European defaults and send USD's down with it, and that's the armageddon time where there won't be any way to even afford a loaf of bread, much less an ounce of silver or gold.
Think about it, bhardy, and to the OP, I wish you had more input than listening to me rattle on about the Euro Crisis, and what may soon come in addition to that is its cause the European Sovereign debt crisis, which will make the problem at least twice as worst or 312 times bigger of a problem than the 156 times we have right now when we're facing a central bank who does not feel committing funds just to lose them is worth the risk, and I agree.
Most of the headlines should support this conclusion, but the economics point of it is obvious, if you understand a lot of macroeconomics, not the misconceptions that pervade our financial media cheerleaders like CNBC. Bloomberg doesn't have as big of a problem when it comes to that, but certainly nearly always features a commentator telling you to buy stocks when they could be the worst investment of the next decade no matter how well adept you are at picking them.